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Wednesday, January 13, 2010
Oh-Oh: Landlords and the State Legislature
The Plan, the Goal....
Albany urged to end multifamily mess
Only the Legislature can prevent years of legal limbo for landlords following the November court ruling against Tishman Speyer on Stuyvesant Town, say real estate attorneys and other experts. The court held that landlords of properties receiving J-51 tax abatements could not remove apartments in those buildings from rent regulation and lease them at market rates. But it did not say whether landlords who have been doing that since the early 1990s would have to refund past rent payments.
The ambiguity will lead to a rash of lawsuits, insiders say. Law firms are already courting clients with advertisements. “Ambulance chasers,” says Jerilyn Perine, a former city housing commissioner who now runs the Citizens Housing and Planning Council of New York, envisioning a legal free-for-all reminiscent of the lead paint and asbestos eras.
But it's not just lawyers. The state Division of Housing and Community Renewal is advising tenants who believe they may be affected by the ruling to file overcharge complaints with the agency. DHCR estimates that 40,000 units are affected; Perine guesses 30,000 to 35,000. Whatever the number, getting loans to renovate or buy the buildings involved is nearly impossible, because future rent rolls and owner liability are unknown. “Rather than leave this issue to be slugged out owner by owner, tenant by tenant, the Legislature should create some clarity about statute of limitations and rent overcharges,” says Perine.
The Legislature could allow landlords to give back their tax abatements retroactively so they would not have to reclassify market-rate apartments as rent-regulated and repay huge sums to “overcharged” tenants. The cash-strapped city could collect a cool $300 million, insiders say. To minimize protests from tenant groups, an exception could be made for tenants whose rent represents a significant portion of their income, as Senate Housing Committee Chairman Pedro Espada Jr. has suggested. The tenant lobby might still balk, but landlords would argue that market-rate renters are mostly well-off New Yorkers who freely signed leases and don't deserve six-figure payouts to reimburse them for rent they willingly paid.